Each month, I ask myself: What do longer-term equity readers really need to focus on, right now?
Traders just closed out the first 6 months of 2017. What’s my answer in July? I quote Detective Joe Friday, from the old TV show Dragnet: “Just the facts, ma’am.”
- What of U.S. GDP growth? This should be a top-of-mind fundamental. On July 6th, GDPNow for Q2 has +2.7%. Final Q1-17 GDP showed modest +1.2% growth.
- Improved U.S. earnings and low U.S. unemployment claims still say: “Don’t worry.” Q2 looks for +6.6% EPS growth. A strong Q1-17 earnings season is in the bag. It scored a stunning +13.9% in EPS growth.
- Monthly labor market evidence? That is as follows. The U.S. created +222K in June, +152 in May, +207K in APRIL, +50K in MAR, +232K jobs in FEB and +216K jobs in JAN. Recall: June was the biggest job addition last year.
- U.S. unemployment was 4.4% in JUNE. This is ‘frictional’ or ‘natural’ unemployment.
Summary: The U.S.A. remains firmly in a 97-month expansion.
July Sector/Industry/Company Telescope
Starting in July, big corporates report their second quarter earnings. Let’s see what covering analysts find is picking up inside the U.S. economy! Before that can happen, here is what ranked highly in June.
To no surprise, Info Tech -- with its Electronics, Misc. Tech, & Semi industry keeps on leading the sector pack. However, the two other hot sectors in June came in as Consumer Discretionary and Health Care. These three are traditional Mid Cycle plays. I don’t see the Late Cycle story yet.
Industrials and Materials are at Attractive. Airlines look great (summer travel and lower oil prices?), as does Machinery. Paper, Building Products/Construction Materials and Chemicals are on, too.
A loser again is the Energy sector -- although Oil & Gas Exploration & Production is picking up.
(1) Info Tech maintains its Very Attractive rating. Misc. Tech and Electronics are the top. Semis stay HOT again.
My top pick: Tokyo Electron Ltd. (TOELY - Free Report) )
(2) Consumer Discretionary stays Very Attractive. The industry leaders are Home Furnishing-Appliance (very best of all), Publishing, Other Consumer Disc. and Autos/Tires/Trucks.
My top pick: Deckers Outdoor Corp (DECK - Free Report)
(3) Industrials fall to Attractive from Very Attractive. The leaders are: Airlines and Machinery. Aerospace & Defense, Pollution Control and Metal Fabricating deserve a look, too.
My top pick: American Airlines (AAL - Free Report)
(4) Consumer Staples maintain Attractive. The only industry leaders are Soaps & Cosmetics, Consumer Products-Misc. Staples and Beverages.
(5) Materialsstay Attractive. Paper, Building Products-Construction Materials, (Housing must be picking up demand) and Chemicals are spots to play. Steel and Metals-Non-ferrous look terrible.
(6) Health Care is back to a traditional Very Attractive rating. The leader is Medical Care, again.
(7) Financials keep a Market Weight. Investment Banking & Brokering, and Banks & Thrifts lead, again. Investment Funds stays the big loser, again.
(8) Telco Services stay a Market Weight.
(9) Utilities get to a Market Weight. The industry leader is Water Supply, again.
(10) Energy stays Very Unattractive.